Do you have a Roth IRA and a Roth 401k? Can you really have both? Can you max out on both? Should you max out on both?…(read more)

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Can I max out on my Roth IRA and my Roth 401k?

For many people, saving for retirement is a top priority. One popular way to save for retirement is through a Roth IRA and a Roth 401k. These accounts offer tax-free growth and withdrawals in retirement, making them a valuable tool for building a nest egg. But can you contribute the maximum amount to both accounts in the same year?

The short answer is yes, you can max out on both your Roth IRA and your Roth 401k in the same year, as long as you meet the income requirements and contribution limits for each account. Let’s take a closer look at each type of account and the rules surrounding their contributions.

Roth IRA: In 2021, the contribution limit for a Roth IRA is $6,000, with an additional $1,000 catch-up contribution allowed for individuals age 50 and older. To be eligible to contribute the maximum amount, your modified adjusted gross income (MAGI) must be below certain limits. For single filers, the phase-out range for 2021 is $125,000 to $140,000, and for married couples filing jointly, it’s $198,000 to $208,000. If your income exceeds these limits, your contribution limit may be reduced or eliminated altogether.

Roth 401k: For a Roth 401k, the 2021 contribution limit is $19,500, with an additional catch-up contribution of $6,500 for individuals age 50 and older. Unlike the Roth IRA, there are no income limits for contributing to a Roth 401k, so high earners can take advantage of this account to save for retirement.

So, if you meet the income requirements and have the financial means to do so, you can contribute the maximum amount to both your Roth IRA and your Roth 401k in the same year. This can be a powerful strategy for turbocharging your retirement savings and taking advantage of tax-free growth.

However, it’s important to consider your overall financial situation before maxing out on both accounts. While it’s great to save aggressively for retirement, you also need to have a well-rounded financial plan that includes emergency savings, paying off high-interest debt, and other financial goals. It’s always a good idea to consult with a financial advisor to make sure you’re making the most of your retirement savings while also addressing your other financial needs.

In conclusion, it is possible to max out on your Roth IRA and your Roth 401k in the same year, as long as you meet the income requirements and contribution limits for each account. This can be a powerful way to supercharge your retirement savings and take advantage of tax-free growth. However, it’s important to consider your overall financial situation and work with a financial advisor to ensure that you’re making the best decisions for your future.